A2-1-01: General Servicer Duties and Responsibilities (07/12/2017)

Overview of General Servicer Duties and Responsibilities

The servicer services Fannie Mae mortgage loans as an independent
contractor and not as an agent, assignee, or representative of Fannie
Mae. Most of the policies and standards described in the Servicing Guide are intended to set
forth the broad parameters under which the servicer must exercise
sound and professional judgment as a mortgage loan servicer in the
performance of its duties. As a result, in most instances Fannie
Mae has not set forth absolute requirements because it believes
that the servicer needs to maintain the discretion to apply appropriate
judgment in dealing with borrowers and mortgage loans on a case
by case basis, consistent with Fannie Mae’s servicing policies.
Further, even where Fannie Mae has set forth a “requirement,” it
has not enumerated specifically how the servicer should implement
it. Fannie Mae generally will not object to the practices the servicer
regularly applies so long as they are carried out in accordance
with established written procedures that are consistent with Fannie
Mae’s servicing policies. The servicer may apply practices
used on its own portfolio of mortgage loans to Fannie Mae mortgage
loans as long as the practices are in accordance with the servicer’s
established written procedures and are consistent with Fannie Mae’s
servicing policies.

As a general matter, the servicer must have sufficient staffing
levels and properly trained staff (including third-party providers of
its outsourced servicing activities) to

carry out all aspects of their servicing
duties in accordance with the timing requirements of the Servicing Guide,

maintain acceptable performance standards, and

provide borrowers with assistance when it is requested.

Furthermore, the servicer (or master servicer) must

require the subservicer/outsource
vendor to have policies and procedures for the contracted servicing
activities;

conduct audits and QC reviews on subservicer/outsource
vendor for contracted servicing activities, including services performed
outside the United States, to ensure compliance with Fannie Mae
requirements; and

conduct operational assessments and reviews that
measure the subservicer/outsource vendor performance in
various departments.

The servicer must have effective processes to promptly address
borrower inquiries (relating to both current and delinquent mortgage
loans) and provide timely payoff quotes and refunds of escrow deposits
after payoff. To the extent consistent with the borrower’s
mortgage loan documents and applicable laws and regulations, Fannie
Mae encourages the servicer to adopt servicing practices that allow
for an appropriate level of discretion to take into account the
facts of a particular mortgage loan and the circumstances of the
borrower.

In performing the services and duties incident to the servicing
of mortgage loans, the servicer must take whatever action necessary
to protect the beneficial interest of Fannie Mae and an MBS trust
in the security property as long as it is authorized to do so by
the terms of the mortgage loan. Among other things, this generally
includes, but is not limited to:

establishing and maintaining accounts for the deposit
of borrowers’ funds;

responding to borrowers’ inquiries (relating
to both current and delinquent mortgage loans) about the terms of
their mortgage loans or the actions the servicer has (or has not)
taken in its servicing of the mortgage loans;

making periodic property inspections to ensure that
the physical condition of the property is satisfactory, that there
are no apparent hazardous conditions (such as the presence of hazardous
wastes or toxic substances) affecting the property, and that there
are no apparent violations of applicable law that might result in
a seizure or forfeiture of the property, and to determine and initiate
the needed responsive actions (see D2-2-10, Requirements for Performing Property Inspections and E-3.3-03, Inspecting Properties Prior to Foreclosure Sale for additional information);

The servicer must use good judgment and take the actions described
in the following table.

✓

The servicer must...

Exercise sound professional judgment
as the mortgage loan servicer in the performance of its duties.

Use its discretion to apply appropriate
judgment in dealing with borrowers and mortgage loans on a case-by-case
basis, consistent with Fannie Mae’s servicing policies.

Perform specific administrative responsibilities
and business obligations in the overall conduct of its mortgage
loan operations as described in the Servicing
Guide.

Service all mortgage loans in a sound,
businesslike manner.

Protect against fraud, misrepresentation,
or negligence by any parties involved in the mortgage loan servicing
process.

Have adequate controls and QC procedures
in place.

Fannie Mae’s basic servicing policies do not change
on the basis of its lien position.

Processing of Funds

The servicer’s authorization to receive, handle,
or dispose of funds representing mortgage loan payments (for principal,
interest, and tax and insurance escrow deposits) or of other funds
or assets related to the mortgage loans it services for Fannie Mae
or to the properties secured by those mortgage loans is limited
to those servicing actions that are expressly authorized in the Servicing Guide or in the Lender
Contract.

Because these funds and assets are owned by Fannie Mae and
other parties (such as the borrower, a participating seller/servicer,
or an MBS holder, if applicable), the servicer, in its handling
of these funds, is acting on behalf of and as a fiduciary for, Fannie
Mae and other parties, as their respective interests may appear;
the servicer is not acting as a debtor of Fannie Mae.

If the servicer takes any action with respect to these funds
or assets that is not expressly authorized, such as the withdrawal or
retention of mortgage loan payment funds Fannie Mae is due as an
offset against any claim the servicer may have against Fannie Mae,
the servicer is not only violating the provisions of the Servicing Guide and the Lender Contract,
but also is violating the rights of any and all other parties that
have a beneficial interest in the funds. Such action is therefore
prohibited and will be considered a breach of the Lender Contract.

Delinquency Advances

Because the servicer of scheduled/actual and scheduled/scheduled
remittance types must remit funds to Fannie Mae when they are scheduled
to be remitted rather than when they are actually collected, there
may be times when the funds collected are not sufficient to make
the servicer’s required payment. In those cases, the servicer
must advance its own funds to cover funds due for delinquent mortgage
loans if the funds have not been collected. Funds advanced for this
purpose are referred to as “delinquency advances.” See C-3-01, Responsibilities Related to Remitting P&I Funds to Fannie Maefor additional requirements related
to delinquency advances.

The servicer of portfolio and participation pool mortgage
loans that are scheduled/actual remittance types is required
to advance scheduled interest only through the third month of delinquency,
except for concurrent sales participation pool mortgage loans, which
require that interest be advanced through the foreclosure sale date.
To avoid advancing interest from its own funds to pass through the
interest due Fannie Mae, the servicer may use the funds it has on
hand for any prepaid P&I installments, curtailments, or payments-in-full
to offset interest shortfalls that occur as the result of mortgage
loan delinquencies. However, if the servicer has no collections
on hand that represent funds not yet due for remittance to Fannie
Mae, it must make the delinquency advance from its own funds. The
servicer may reimburse itself for its delinquency advances from borrower
collections that are subsequently deposited to the P&I custodial
account.

The servicer of portfolio and MBS mortgage loans that are
scheduled/scheduled remittance types, regardless of the
applicable servicing option, is required to advance scheduled P&I
until the delinquent mortgage loan is removed from Fannie Mae’s
active accounting records or the MBS pool. The servicer must make
a delinquency advance if the funds on deposit in the servicer’s
P&I custodial account on the day the monthly remittance is due
to Fannie Mae are less than the amount of the required monthly remittance.
The servicer may reimburse itself for its delinquency advances from
borrower collections that are subsequently deposited to the P&I
custodial account.

Servicing Advances

The servicer must pay all out-of-pocket costs and expenses
incurred in performing its servicing obligations, such as those related
to the following:

Funds advanced for this purpose are referred to as “servicing
advances.”

Servicing advances may be recovered from the borrower, insurance
proceeds, claims settlements, or other available sources, except
as described below. Fannie Mae will reimburse the servicer for certain
unrecovered losses under the following circumstances:

when the expense relates to protection
of the security or foreclosure costs for a portfolio mortgage loan,
or

for an MBS mortgage loan serviced under the special
servicing option.

Fannie Mae will not reimburse the servicer for unrecovered
losses for costs, losses, or other items that the servicer agreed to
hold Fannie Mae harmless against under its warranties or indemnification
agreements or for advances made in connection with litigation or
proceedings that Fannie Mae did not approve (if its approval was
specifically required).

In no event may the servicer recover its servicing advances
for a specific mortgage loan from the P&I payments for another mortgage
loan or from the T&I deposits in another borrower’s
account.

Related Announcements

The following table provides references to Announcements that
are related to this topic.